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First time buyers still "locked out" of market: Shelter

10 June 2010

Would-be first time buyers are still locked out of home ownership as mortgages remain out of reach and hefty deposits are still required, according to research for Shelter Scotland, the housing charity announced today.

Figures from the annual Shelter Affordability Index show that despite the impact of the recession on house prices, coupled with low interest rates, becoming a homeowner in Scotland is 75% harder than 15 years ago. Scotland is worse off in this respect than the UK as a whole, where the increase is 65%, and has seen less of an improvement since teh recession.

The 2010 Affordability Index for Scotland stands at 175.6, compared with 100 when the Index started in 1994.

The findings show that the biggest barrier to home ownership remains access to finance. Recent figures from the Council of Mortgage Lenders (CML) show that the average deposit for a first-time buyer stands at 25%, which would mean £31,000 in Scotland.

And despite the Bank of England base rate remaining at a historic low of 0.5% in 2009 – less than a tenth of the May 2007 rate – average mortgage rates have fallen by less than a third during the same period, from 6.08% at the end of 2007 to 4.16% at the end of 2009.

However, if you are able to buy, then Scotland is the best place to be a first time buyer in the UK with mortgage costs only 13.7% of the average working household income, compared to the UK-wide figure of 17.3%.

"New approach"

Shelter is calling for a new approach to housing policy that moves away from "the myopic pursuit of homeownership" – which risks a return to inflated house prices – towards one that promotes long-term affordability for home owners and tenants alike.

Graeme Brown, Director of Shelter Scotland, said: “It is a sobering thought that despite the first house price crash in 15 years, the deepest recession since the war and the lowest interest rates in history, it is still harder to buy a house in Scotland than it was before the recession.

“The Scottish Government‘s new discussion paper launched recently posed some pretty fundamental questions about the future direction of housing policy but perhaps the most fundamental one is the housing choices we offer.

“There are tough choices ahead, amid a tight spending environment, but the government’s new discussion document presents a great opportunity for a new vision. Long term affordable housing for home owners and tenants alike must be the priority. A vision where Scotland provides 21st century housing fit for everyone and does not focus on a myopic pursuit of homeownership to the exclusion of all other tenures. If we don’t, there is the risk of a return to inflated house prices and a second economic crisis.”

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Friday June 11, 2010, 20:38

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